When I wrote previously that the addition of the Czech Republic's TV Nova would be a substantial event for Central European Media (CME)
I'll concede that CME's earnings reports are not the easiest to decipher, but I would nevertheless state that the second quarter was a strong one for this operator of TV stations across Central and Eastern Europe.
Reported revenue climbed 152% for the period. Of the $68 million increase in revenue, $55 million came from operations in Croatia and the Czech Republic that were added since last year. Even without the new stations, though, revenue would have been up 22% for the period.
Operating performance was not much clearer. Reported operating income was down 22% from last year, but that includes a sizable impairment charge for the Croatian operations. Without that charge, operating income would have been up close to 400%. Looking at segment EBITDA, the company saw 20% growth excluding the added stations.
With TV Nova now on board, the company seems to be shifting focus toward improving those stations it now owns. Despite the impairment charge taken this quarter, management continues to work on improving the results in Croatia and hopes to break even on an EBITDA basis in 2007 (for this quarter, Croatian operations had negative segment EBITDA of $1.3 million out of total reported segment EBITDA of $58.3 million).
Elsewhere, the company continues to expect second-half improvement in the Ukraine and is working to overcome a flat ad market in Slovenia. On a more positive note, Romania continues to fire on all cylinders and is second only to the Czech Republic in terms of the size of its EBITDA contribution.
As you might imagine, operating so many stations in so many different countries gives rise to a host of problems. Aside from the fact that the company Christmas party must sound like the Tower of Babel, there are differing tax laws, broadcasting regulations, and local economic conditions to navigate.
But this is an area of Europe that's actually growing, so I'd argue that the hassles are well worth it -- even if News Corp.
Sooner or later, I think I'll end up owning these shares. I like the notion of emerging market TV, and while SBS Broadcasting
For more companies playing in Central and Eastern Europe:
- CEDC Bellies Up to the Bar
- Why Not Watch SBS Broadcasting?
- A Cold Winter Warms Up E.ON
- A Station Break in Central Europe
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).